Correcting a W-2: From W-2c - PowerPoint Presentation

Slide1

Correcting a W-2: From W-2c to 941-X and More

Maine Association of Payroll Professionals

Date:

November 30, 2012

Presented By:

Rosemarie Fraumeni, CPPSlide2

Rosemarie Fraumeni, CPPManager, Payroll - American Dental Partners

Biography

Certified Payroll Professional since 2000

BS in Accounting

Involved in payroll since 1991

Member of APA’s

National Speakers Bureau

Certification Advisory Board –

CPP

Committee

Government Affairs Task Force

Member of the APA Boston Local Chapter

Current Vice President

Member of the New England Payroll Conference Committee

Current

Conference Chair and Treasurer

APA Awards

2010 Payroll Woman of the Year

Special Recognition 2008

Meritorious Service 2005Slide3

Form W-2cDevise forms for employees to complete:Include a schedule of when they will be processed

One for replacements

One for corrections

Have an employee indicate what he/she thinks is wrong

Have employee attach supporting documents: copy of W-2, last pay stub, etc.

Have employee sign and date the form – very important!Slide4

Form W-2 ReplacementsWrong address and it comes back:Make a copy of the return envelop for proof of mailing

Put original in new envelope

Doesn’t require W-2c

Completely lost:

Reprint, indicate “Reissued Statement” on the top – not required by IRS, but good practice

You’re allowed to charge for this! (as well as replacements for prior year Forms W-2)Slide5

Form W-2, Corrected Not W-2cIssued before W-2s are filed with government, and assumes that you can change the W-2 file that you’ll submit to SSA (but you might still need to file Form 941-X)Indicate “Corrected” on the top of the W-2 paper form

Form 941-X may be requiredSlide6

Review: Form W-2cBoxes a-d and h-I are mandatoryBoxes e-g depend on circumstance

Can’t correct federal/state/local income tax withholding

Exception: an administrative error – such as “withheld $500, but reported $600, and now must correct W-2 to reflect what actually happened”Slide7

Review: Form W-2cRefunds to employees:

You may refund FICA, but not FIT/SIT/LIT

And you can request employer FICA too,

on 941-X

Review boxes:

Just complete boxes (as reported, as corrected) for anything you are correcting

Don’t zero-fill other boxes

Box 12 codes: indicate code letterSlide8

Only Changing State of Local Data?Do not send it to SSA! They have no need to see it, and it just adds to their processing load.You can correct wages, but not taxes, unless it’s an administrative error (see slide 6, above)Slide9

Review: Form W-3cForm W-3c is required to be filed with any submission of paper Form(s) W-2c.Boxes a-e are mandatory; f is optional; g is for correcting state/local info; h-j depend on circumstance

Review boxes:

Just complete boxes (as reported, as corrected) for anything you are correcting – this is a summary of all W-2c forms being submitted with this W-3cSlide10

Review: Form W-3c, Cont.Don’t zero-fill other boxesBox 12a: for deferred compensation, enter only the total of codes D-H, S, Y, AA, BB and EE; don’t enter code letters

Box 12b: for HIRE exempt wages & tips

Explain decreases: keep it simple. If many different reasons, use a different W-3c for each batch

“Has an adjustment been made…?” Check a box. If “yes,” indicate date of Form 941-X on which you take the adjustment.Slide11

Form 941-X (effective 1/1/09)Replaces Form 941c and Form 843

One Form 941-X for each Form 941 that you are correcting

Stand alone form – do not attach to Form 941

Form 941 will no longer have adjustment

lines for

correcting prior quarter errors

If correcting both underreported and

over reported

amounts for same tax period, use

a single

Form 941-X to report bothSlide12

Form 941-X, Cont.Two processes to choose from: adjustment process or claim processAdjustment process is used to apply a credit (over reporting) to your next Form 941 or reporting an underpayment

Claim process is used to file for a refund

Form and instructions contain a chart and several examples to help with choosing and completing appropriate processSlide13

Form 941-X, Cont.Deadlines for filing Form 941-X:If you are correcting an underreported tax, the 941-X must be filed by the due date of the 941 for the period in which you discover the error

If you are correcting an over reported tax, the 941-X is due before the period of limitations expires (within 3 years of date 941 was filed or 2 years from date you paid the tax, whichever is later)

Note: The adjustment process

cannot

be used in last 90 days of period of limitations – must use claim process and receive refundSlide14

Form 941-X, Cont.Part 3: Just complete boxes (as reported, as corrected, etc.) for anything you are correcting, don’t zero-fill other boxesCaution! Be sure to use the appropriate tax rates for the year being corrected. (6.2% vs. 4.2%)

Part 4 – Explanation: Keep it brief, match W-3c explanationSlide15

Where do you get the forms?Social Security Administration’s Business Services

Online

www.socialsecurity.gov/bso/bsowelcome.htm

Create

, store, and electronically file with SSA up to 5 forms at a time

Print copies for employees and state/local filing

But can’t use it for forms correcting only

state/local information

APA’s fill-in-and-print W-2c, W-3c and

941-X

http://www.americanpayroll.org/members/Forms-Pubs/

Fill-in

pdf

; print out all copies, save paper copies as cannot save

pdfSlide16

Form W-2c ChecklistW-2c Checklist:Employee info

Source error documentation

Correction resolution

Journal entriesSlide17

Change of Name or SSNExample: Sheila Fortune

Generally

, one W-2c will suffice

for multiple

years

No need for Form 941-X

Don’t forget you will need a Form W-3cSlide18

Refunding Over Collected SS TaxExample: Dwight EllisInvolves Form 941-X

When to complete Form 941-X

If no $ involved, not needed: change of name, SSN, Box 10, Box 12 codes, state or local wages

But if changing federal wages and taxes, do it!Slide19

Form 941-X ReviewMandatory: name, FEIN, address, return correcting info, date error discoveredPeriod corrected: not the period when you discovered error, but the period in which the error took place

Review process choices in Part 1

Review certifications in Part 2: depends on circumstances of correction

Part 3: depends on the taxes being adjustedSlide20

Form 941-X, Part 3Column 1: Correct wages for the periodColumn 2: Wages previously reported: from the 941 of the period being corrected

From W-3c, calculate increase (decrease) in taxable wagesSlide21

Form 941-X, Part 3, Cont.Column 3: Difference (Col. 1 minus Col. 2)Column 4: Tax Correction

For FICA taxes, use rates shown if correcting both employee and employer share

If correcting employer share of FICA only, use rates noted with asterisk

Make sure you are using the correct form. Current Version: April 2012Slide22

Form 941-X, Part 4ExplanationBrief, conciseGroup like errors together

Use similar explanation as on W-3cSlide23

General Ledger EntriesExample: EllisA/P Manual check: don’t run it through payroll, or it will affect current year tax balances on the W-2 (or your system will self-adjust and recollect)

GL entry for refund check to employee

GL entry for deposit of IRS refundSlide24

Reversing Wages From a Check That Was Never Given to EmployeeExample Brian LooneyInvolves Form 941-X

Period corrected: not the period when you discovered error, but the period in which the error took place

Wages previously reported: from the 941 of the period being corrected

This is considered an administrative error!Slide25

Reversing WagesExample: LooneyFrom the W-3c, calculate the increase (decrease) in taxable wages

Add/subtract that to/from column 2 to get column 1Slide26

General Ledger EntriesExample: Looney

GL entry to back out wages

GL entry to back out deductions you have a chance of getting back

GL entry to set up receivable for expected tax refunds

GL entries for deposits of tax refundsSlide27

Under Reported Wages From a Manual CheckExample Martin McFarlandInvolves Form 941-XPeriod corrected: not the period when you discovered error, but the period in which the error took place

Part 2: Check only Line 3 – no refunds involved

Wages previously reported: from the 941 of the period being corrected

Calculate the increase in taxable wagesSlide28

Under Reported WagesExample: McFarlandAdd that to column 2 to get column 1For FICA taxes, use rates shown as correcting both employee and employer share

Make deposit immediately

GL EntrySlide29

Correcting Form 940Redo the return, making changes as appropriateCheck the “amended return” box, right above Part I

There will definitely be changes in Part I, line 1, and possibly on other lines.

Unlikely that this will affect tax that is due, unless there was a change for someone who earned less than $7,000 (FUTA wage base)Slide30

State ImpactRevenue (SIT)Every state is differentCheck out your coupon book (amended or corrected annual recon)

Some states have you use the same form and write “amended”

Check out state rules: call or go to websites

www.americanpayroll.org/states.htmlSlide31

State Impact, Cont.Unemployment InsuranceCheck first if it’s a state that wants gross wages in addition to taxable wages (If not, and the person exceeded taxable wage base, you don’t have to go any further!)

Every state is different

Check out what forms the state has for amending a return

Check out state rules: call or go to websites

www.americanpayroll.org/states. htmlSlide32

Questions? Contact InformationRosemarie Fraumeni, CPPrfraumeni@comcast.net

978-621-0270